Popular wisdom suggests that if you want to succeed financially, you need two things: financial knowledge and access to appropriate financial products. This combination is commonly referred to as financial capability. But a groundbreaking paper from the EARN Research Institute points out that these two factors only lead to financial success when paired with a third component: financial self-efficacy. The new research illuminates a crucial gap in how most financial education experts believe people manage their money successfully. In light of EARN’s research findings, the definition of financial capability needs to be expanded to include self-efficacy.

1. Redefining Financial Capability April 21, 2011 Follow @EARN on Twitter

2. Redefining Financial Capability Your Host Sunaena Chhatry Public Policy Manager EARN Sunaena@earn.org www.earn.org www.facebook.com/earnorg www.twitter.com/earn 2

3. If you are unable to hear us speaking right now, call-in using your telephone. Dial: 1 (805) 309-0022 Access Code: 294-618-758 www.earn.org www.facebook.com/earnorg www.twitter.com/earn 3

4. Download paper at www.earn.org www.earn.org www.facebook.com/earnorg www.twitter.com/earn 4

5. www.earn.org www.facebook.com/earnorg www.twitter.com/earn 5

6. Agenda Welcome & Introductions Presentation by Ben Mangan (30 min) Q&A (20 min) www.earn.org www.facebook.com/earnorg www.twitter.com/earn 6

7. Join the Conversation on Twitter We’ll be tweeting key takeaways throughout the presentation on Twitter. To participate, visit twitter.com/EARN and include the hashtag#fincapin your message. www.earn.org www.facebook.com/earnorg www.twitter.com/earn 7

8. Redefining Financial Capability Presenter Ben Mangan President & CEO EARN Ben@earn.org www.earn.org www.facebook.com/earnorg www.twitter.com/earn 8

9. Evolution of Financial Capability “Financial Literacy”? Growing body of data suggests financial education alone is ineffective Influencing behaviors powers change “Financial Capability” is apt new term of art www.earn.org www.facebook.com/earnorg www.twitter.com/earn 9

10. New Definition of Financial Capability CFSI has pioneered an important new definition of Financial Capability: www.earn.org www.facebook.com/earnorg www.twitter.com/earn 10

11. Defining Financial Self-Efficacy “Self-Efficacy” is one's belief in one's ability to succeed in specific situations Self-efficacy can play a major role in how one approaches goals, tasks, and challenges EARN’s research led to us to adapt the concept with the term “Financial Self-Efficacy” www.earn.org www.facebook.com/earnorg www.twitter.com/earn 11

12. A New Dimension for Financial Capability www.earn.org www.facebook.com/earnorg www.twitter.com/earn 12 Financial Self Efficacy

13. The Research Basis for Financial Self-Efficacy EARN analyzed 487 baseline surveys, and 54 surveys at Year 1 Factor analysis of sets of questions related to: Financial Knowledge Financial Problems Financial Self-Efficacy All sets of questions internally consistent High levels of statistical significance www.earn.org www.facebook.com/earnorg www.twitter.com/earn 13

14. EARN’s Predictive Model of Financial Behavior www.earn.org www.facebook.com/earnorg www.twitter.com/earn 14

15. Five Key Findings Related to Financial Self-Efficacy Financial Self-Efficacy was the pivotal predictor of fewer financial problems Financial Self-Efficacy grew as financial knowledge grew When financial happiness grew, perceived financial stress decreased Increases in knowledge led to increases in self confidence, leading to more successful outcomes, and increased financial Self-Efficacy. We believe that increasing Financial Self-Efficacy will increase Financial Capability. www.earn.org www.facebook.com/earnorg www.twitter.com/earn 15

16. An Uncomfortable Question www.earn.org www.facebook.com/earnorg www.twitter.com/earn 16 Do our current industry standards impede the growth of Financial Self-Efficacy + Financial Capability?

17. Evidence and Current Standards Disconnected Norms + rules for distributing resources to low income people designed for control + fraud prevention – not Financial Self-Efficacy or Financial Capability. www.earn.org www.facebook.com/earnorg www.twitter.com/earn 17

18. How Can You Foster Financial Self-Efficacy? Embrace “plain vanilla” savings opportunities Conduct a Financial Self-Efficacy “audit” Foster a culture skeptical of unjustified paternalism www.earn.org www.facebook.com/earnorg www.twitter.com/earn 18

19. Financial Self Efficacy in Action SERVICES: Financial Coaching most effective when anchored by program designed that lets clients foster Financial Self-Efficacy. www.earn.org www.facebook.com/earnorg www.twitter.com/earn 19 PRODUCTS: EARN re-launching new offering this year that was redesigned as a result of our research findings

20. Implementing Financial Self-Efficacy in Design EARN Matched Account Example: www.earn.org www.facebook.com/earnorg www.twitter.com/earn 20 Testing for Financial Self-Efficacy and Financial Capability

21. Emerging Research Questions What’s in the secret sauce? What is the optimal combination? Can we “manualize” the inputs? www.earn.org www.facebook.com/earnorg www.twitter.com/earn 21

22. Implications for Public Policy www.earn.org www.facebook.com/earnorg www.twitter.com/earn 22

23. Collaboration Can Spark Progress Many worthy experiments Need to advance the science behind assertions with RCTs Funders, practitioners and government need to build the case for what works www.earn.org www.facebook.com/earnorg www.twitter.com/earn 23

24. Q & A www.earn.org www.facebook.com/earnorg www.twitter.com/earn 24

25. Thank You! www.earn.org www.facebook.com/earnorg www.twitter.com/earn 25 Sunaena Chhatry Public Policy Manager EARN Sunaena@earn.org @Sunaena Ben Mangan President & CEO EARN Ben@earn.org @BenMangan